Illinoisans saw jobs growth plummet after 2017 tax hike

Illinois' jobs growth trailed that of the nation during the first half of 2017, then slowed to a halt in the wake of the General Assembly's record-breaking tax hike.

Illinois’ 2017 jobs picture was defined by mild growth in the first half of the year followed by dismal growth in the latter half of the year, according to monthly jobs data released Jan. 19 by the Illinois Department of Employment Security.

The year started out relatively strong for most industries in Illinois, leading to robust jobs growth over the year in the construction, mining, financial activities and manufacturing sectors. But total jobs growth over the year clocked in at a meager 0.5 percent.

From January 2017 to June 2017, Illinois gained 25,500 jobs – a growth rate of 0.43 percent. Those gains in the first six months of 2017 represented 86 percent of the jobs growth for the entire year.

However, during the second half of the year, from July to December, the state added only 4,000 jobs – a growth rate of 0.07 percent.

Meanwhile, the rest of the United States experienced strong employment gains that outpaced Illinois, and saw even stronger gains during the second half of 2017.

Despite a relatively solid start to the year in terms of private-sector job creation, Illinois’ labor market weakened in the second half of the year. Uncertainty in Springfield and lawmakers’ record of raising taxes has made Illinois a less attractive place to invest.

December saw jobs growth driven by government sector

Illinoisans saw 1,500 new jobs on net in December 2017. Government payrolls led the way, accounting for 39 percent of the net new jobs in December.

But the following sectors were all losers to close out the year: mining; trade, transportation and utilities; information; financial activities; professional and business services; education and health; and leisure and hospitality.

Déjà vu: Illinois shackles state economy with tax hikes

The slowdown of Illinois’ economy in the second half of 2017 is not surprising to experts. It’s only a glimpse of what’s to come. With a declining population, the employment picture and the state’s economy are likely to continue down this sluggish path barring reform, just as they did after the 2011 tax hike.

The Illinois Policy Institute recently estimated that the income tax hike lawmakers passed in 2011 cost the Illinois economy 9,300 jobs and $56 billion in real gross domestic product from 2012 to 2016. This is a conservative estimate given historical data.

Measuring the effects of tax changes on the economy is a challenging task. But fortunately, there’s a large body of expert literature that addresses difficult empirical challenges and proposes economic theories that are consistent with the evidence. Romer and Romer (2010) find that tax increases have a negative impact on real gross domestic product, due to the negative effect of taxation on investment. These results are consistent with the findings of Blanchard and Perotti (2002) and Mountford and Uhlig (2009).

Lawmakers should begin working to provide tax relief for all Illinoisans by constraining the growth of government in order to avert future tax hikes and begin to roll back the 2017 tax hike. A fiscally solvent state government will restore a sense of security about the future, making Illinois a more attractive place in which to plant roots and invest.

Illinoisans need to hold their lawmakers accountable by urging them to begin rolling back the 2017 tax hike before the situation worsens.

The following is a list of state lawmakers who voted at least once for the 2017 tax hike: